DOL signals rollback on worker classification, joint-employer rules

SUMMARY

• DOL prepares new regulatory action on joint-employer and independent-contractor rules
• Wage and Hour Division suspends enforcement of 2024 contractor rule
• Shift favors employer-friendly “economic reality” test over Biden-era framework
• Businesses face private litigation risks despite reduced federal enforcement

The U.S. Department of Labor is gearing up to reintroduce regulatory action targeting joint employer definitions and independent contractor classifications.

A recently published White House regulatory agenda listed these rules as being at the proposed rule stage.

In May 2025, the department signaled a significant shift by directing its Wage and Hour Division to suspend enforcement of the Biden-era 2024 independent contractor rule.

Instead, investigators were instructed to revert to longstanding precedent — including Fact Sheet No. 13 and a 2019 opinion letter — to evaluate whether a worker should be considered an employee or contractor.

These developments suggest that federal regulators are preparing to roll back the more aggressive “totality of the circumstances” framework that favored worker classification as employees. The change signals a preference for the older, more traditional “economic reality” test.

Here are some ways that these policy shifts could impact how businesses approach worker classification and joint-employer responsibilities moving forward:

• Expect a return to clarity and predictability: The older approach leans more employer-friendly, with defined factors such as level of control, opportunity for profit or loss, permanence and the nature of the work.
• Joint-employer rules might also narrow: While details are still pending, the joint-employer definition, which was previously broader, might revert to a tighter standard emphasizing direct control, a departure from Biden-era interpretations.
• Private litigation remains: Even if the Labor Department pulls back enforcement, businesses could still face legal risks. The 2024 rule remains valid in private disputes and might continue to influence classification claims in courts.
• Strategic compliance check-up: Employers should review worker classifications now, preparing to adapt to renewed enforcement standards. Internal audits and documentation of contracts, workflows, and how workers are managed will be essential.

EXTERNAL LINKS

• U.S. Department of Labor Wage and Hour Division
• White House Regulatory Agenda
• Fact Sheet No. 13: Employment Relationship Under the Fair Labor Standards Act